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Which Stocks Will Win in the Education Tech Space?

- By Joshua Rodriguez

Education technology is a booming industry. In fact, by the year 2024, the smart learning and global education market is expected to grow to be worth $994 billion. Moreover, the market is growing rapidly. Growth in the industry is expected to take place at a CAGR of 22.7% through the year 2024.


With so much money in the industry, it's not surprising to see that investors are starting to take interest here. But, as with any other industry, it's important to make the right picks if you're going to invest in education tech. With that said, the five stocks listed below appear to have a strong chance of producing gains in the education tech space.

K12 Inc. (LRN): a pioneer in education technology

Found in 1999 , K12 is one of the pioneers in the education technology space. The company realized that while traditional brick-and-mortar education opportunities worked well for some children, others feel constrained by the model that doesn't fit their needs.

As a result of these findings, the company worked to develop public and private online schools, using innovative curricula and technologies to help students reach their full potential.

The company doesn't simply offer an alternative to traditional education, it also offers career readiness programs, support services, blended learning and several other services.

This online experience has helped to bring a meaningful learning experience to students, regardless of geographic, socioeconomic or academic circumstances. Nonetheless, the company's success isn't seen only in the children that it teaches.

In fact, the stock has done overwhelmingly well as of late. Over the past year, the stock has gained around 100%, climbing from $16.03 to more than $31 per share. Nonetheless, with profit-taking seen recently and an expectation that the stock will continue in the right direction for the foreseeable future, K12 represents a compelling investment opportunity.

TAL Education Group (TAL): improving education outcomes in China with leading technologies

TAL Education Group is essentially the equivalent of K12 in China. Founded in 2003, the company is also a pioneer in China's education technology industry.

The company's ultimate aim is to promote learning opportunities for Chinese students through high-quality teaching and content, as well as the application of leading-edge education technology.

The company provides tutoring services to students ranging from pre-school to 12th grade at three different levels. These are either small classes, personalized premium services or online courses with a network that spans more than 50 key cities in China.

It's also worth mentioning that TAL has several sub-brands. These include Speiyou, xueersi.com, Izhikang, First Leap, Mobby and several others. Each of these sub-brands covers products that are designed to improve the learning experience through the introduction of innovative technologies.

Most recently, TAL joined forces with UNESCO. Under the agreement, the two will work on AI and future learning technologies, and will invite experts and scholars in related fields to discuss how to facilitate future educational development and promote international educational cooperation and technological transformation.

While TAL saw some weakness toward the end of 2018, the stock has began a strong recovery in the year 2019. So far, it has climbed from $25.99 per share to more than $35 per share this year. Given the activity seen from the company throughout the year, this growth is likely to continue.

Galaxy Next Generation (GAXY): providing the technology that will improve global classroom engagement

Galaxy Next Generation is a relatively small player in the space that has the potential to produce incredible returns. The company's claim to fame is its line of private-label education technology solutions that are designed to allow teachers to engage their students in a fully collaborative instructional environment.

Most notably, the company provides a robust line of private label interactive touch screen panels, designed to drive engagement between student and teacher. The company also provides a wide range of other national and international branded peripheral and communications devices.

It is also showing strong growth in uptake of the company's products across the U.S. The strong growth in the region has to do with incredible growth in the company's distribution network.

In fact, in recent months, the company has nearly doubled its reseller network. That network includes 29 resellers throughout the U.S. Just months ago, that number was only 16.

As a result of the expanding reseller network, the company is seeing strong growth in sales. According to the company's most recent financial report , sales are growing at a rate of 14% year-over-year. The company is also seeing strong growth in gross margin, which is currently sitting at about 18.2%. The growth seen in revenue has led to a strong run in value over the past year, with the stock gaining more than 35% over the period.

Chegg (CHGG): providing the tools required for higher education

Chegg was founded in 2005, and has reached an incredible level of success in the education technology industry. The company operates an interconnected learning platform, providing on-demand, adaptive, personalized, educational tools.

The company has a unique approach that hosts both learning and earning opportunities. Tailored toward high school and college students, the company offers innovative tools that help students excel in class. The company also generates revenue through the sale of online textbooks and tutoring services.

That's where the earning side of the equation comes in. Students and graduates who are excellent in specific subjects have the ability to earn by helping others learn through tutoring services on Chegg. The company offers $20 per hour to tutors, creating a compelling opportunity for college students to earn their way through school.

This approach has led to strong growth in 2018 . In fact, the company's subscriber base grew by 38%, with revenue increasing 37% in the year. As a result, there has been strong appreciation in the value of the stock. Since the beginning of the year, the Chegg has gained more than 32%.

Instructure Inc. (INST): educating in the classroom and the corporate environment

Instructure is focused on the development of software designed to improve the education system both in college classes and in the corporate environment.

Instructure has two flagship products. The first is Canvas , a learning management system that is designed to reduce the amount of time it takes for college professors to manage online courses.

The Canvas software helps with the creation of new courses, grading, student management, communication between student and teacher and more. In fact, the system is so intuitive that it was selected as the learning management system for the California Community College Online Initiative.

The company's other product is known as Bridge . The product, designed for the corporate side of the world, is an employee development suite. Through the Bridge suite, employers can more effectively train employees, tracking progress each step of the way.

The Bridge software has proven to be such a strong employee development tool that it is used at companies like Slack, Tesla and Clemson University.

Due to the compelling increase of adoption of the company's products as of late, there has been strong growth in the stock. In fact, year to date, it has grown by more than 15%, outpacing the S&P 500.

This article first appeared on GuruFocus.